Not surprisingly, Moody’s Investors Service downgraded the credit ratings of all six of Canada’s big banks, citing: “[The] expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, could lead to a deterioration in the banks’ asset quality, and increase their sensitivity to external shocks.”
The main worry has been one we have been following on Moneytalks for years, the expansion of private-sector debt, now at a record high of 167.3 per cent of disposable household income.
Moody’s concern is the expansion of consumer debt and the elevated housing market leaving consumers and Canadian banks more vulnerable to downside risks.
The overriding worry is that any kind of serious economic downturn, and that is possible, with debt at these levels could play badly for consumers and have negative effects on bank portfolios.
Canadian bank stocks are down between 1/2 and 1 1/2 per cent this morning.